Correlation Between Fevertree Drinks and Caledonia Mining
Can any of the company-specific risk be diversified away by investing in both Fevertree Drinks and Caledonia Mining at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fevertree Drinks and Caledonia Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fevertree Drinks Plc and Caledonia Mining, you can compare the effects of market volatilities on Fevertree Drinks and Caledonia Mining and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fevertree Drinks with a short position of Caledonia Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fevertree Drinks and Caledonia Mining.
Diversification Opportunities for Fevertree Drinks and Caledonia Mining
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Fevertree and Caledonia is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining and Fevertree Drinks is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fevertree Drinks Plc are associated (or correlated) with Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Caledonia Mining go up and down completely randomly.
Pair Corralation between Fevertree Drinks and Caledonia Mining
Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to generate 0.56 times more return on investment than Caledonia Mining. However, Fevertree Drinks Plc is 1.77 times less risky than Caledonia Mining. It trades about -0.16 of its potential returns per unit of risk. Caledonia Mining is currently generating about -0.45 per unit of risk. If you would invest 74,300 in Fevertree Drinks Plc on September 1, 2024 and sell it today you would lose (4,600) from holding Fevertree Drinks Plc or give up 6.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fevertree Drinks Plc vs. Caledonia Mining
Performance |
| Timeline |
| Fevertree Drinks Plc |
| Caledonia Mining |
Fevertree Drinks and Caledonia Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fevertree Drinks and Caledonia Mining
The main advantage of trading using opposite Fevertree Drinks and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks position performs unexpectedly, Caledonia Mining can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Caledonia Mining will offset losses from the drop in Caledonia Mining's long position.| Fevertree Drinks vs. SBM Offshore NV | Fevertree Drinks vs. Solstad Offshore ASA | Fevertree Drinks vs. Teradata Corp | Fevertree Drinks vs. Fidelity National Information |
| Caledonia Mining vs. Alaska Air Group | Caledonia Mining vs. Medical Properties Trust | Caledonia Mining vs. Sealed Air Corp | Caledonia Mining vs. Fevertree Drinks Plc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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